August 2011 Budget Bill: Where the US Government Went Wrong

Once again the US politicians prove that they don't have a clue about, or an interest, in the greater good. Just like with the Health Care Bill, this Budget Bill is tossed together with little intelligent thought or understanding of governments role. If the US politicians truly cared about balancing a budget and creating jobs, they would have agreed to a bill that would have done that.

The first step in balancing the budget would have been a show of good faith from the politicians themselves. They should have agreed to a deep cut in their own salaries. I say 100,000$ since I believe that they all have their own businesses that they run and in no way need the US public funding them. Public service shouldn't be for their own capital gain. It would only cut the budget by 54.8 million dollars, but it would be a step in the right direction.

The second step would have been to come to terms with an acceptable flat tax for all individuals with tax reimbursements for those have an imbalance in their income to the average cost of living for the area they live in. What this means is that I would agree to a non-refundable 15% tax rate for everyone from the millionaire business owners and investors, all the way down to the individuals that are Just Over Broke (at the poverty line). Only those that earn less than the average cost of living in their area would get a tax reimbursement after filing their taxes. But that reimbursement would only cover the difference of their after tax income to the average cost of living amount for their area, and max out at the 15% tax rate that they paid, or should have paid through out the year.

Third, supply tax incentives to businesses. For instance, if a company increases their number of US based employees through out the rest of the year, reduce their tax liability. Isn't it better to collect from the working public? (Oops, we just slipped into job creation.) Also, increase the tax penalty on US companies that outsource work to other countries. Nothing outrageous. Just enough to get them to at least think about keeping more jobs at home. Increase the tax on imports. Again, nothing outrageous. Just enough to get them to look into local companies to produce the goods. What all of these numbers are would be best asked for from a panel of economists majors.

Fourth, reform the government agencies. Put quotas in place to achieve better performance for the pay that the directors are receiving. This would set a benchmark that would cause the private sector to re-evaluate the salaries that they offer their executives. And although this may be too late to the party, for all the companies that are still holding on to the bail out money they receive three years ago, start leaning on them to pay it back,  by getting their executives to take temporary pay cuts so that bailout can be paid back. Especially if they are the same ones that were there before 2008.

Lastly, to increase the number of jobs and lessen the dependency on foreign oil, actually work on funding the U.S. infrastructure. That means solar, wind, and even tidal generated power. Use U.S. based manufactures to build and assemble the generation units and higher U.S. citizens to build, assemble, install and maintain the devices.

I have several more ideas, but these alone I believe will actually produce a shocking change in economy. I would really like for someone to show me how I am wrong. That is my opinion, you can take it or leave it. Disclaimer: See bottom of page. http://investorsopinion.blogspot.com

Market's Rebound

The market's rebounded greatly today despite reports that the U.S. private sector cut 697,000 more jobs in February and that the services sector shrank, although less than estimated, for the fifth straight month. The rally is being attributed to 1) announcements of a possible Chinese economic stimulus package that spured the bounce of the Asian markets; and 2) the released details about an Obama administration plan to help struggling homeowners.

The possible Chinese economic stimulus package peaked the interest of speculators who bumped up the price of oil and other basic materials, on the assumption that the Chinese economy may be getting restarted.

The released details of a government program designed to help as many as 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments got some the bulls off the side lines and into some retail and consumable goods sectors in addition to the construction and basic materials sectors.

Asia:
Nikkei => 7,290.96, +61.24, +0.85%
Hang Seng => 12,331.15, +297.27, +2.47%
Straits Times => 1,544.34, +15.83, +1.04%

Europe:
FTSE => 3,645.87, +133.78, +3.81%
DAX => 3,890.94, +200.22, +5.42%
CAC => 2,675.68, +121.13, +4.74%

U.S.:
Dow => 6,875.84, +149.82, +2.23%
Nasdaq => 1,353.74, +32.73, +2.48%
S&P => 712.87, +16.54, +2.38%

As for me:
AMD => 2.30, +0.23
AMD DG => 0.12, +0.02
F => 1.87, +0.06
HRP JZ => 1.15, -0.35
MIPS => 2.05, -0.01 (OTO: Buy @ Stop 2.08 - Limit 2.10, Sell @ Stop 1.78)
NG => 2.58, -0.02
QAV QZ => 1.53, -0.24, (Sold to Close @ 1.59)

Market Opinion:
A growing opinion in the market is that it may have created itself a bottom. This is on analysis of the VIX which moves opposite the S&P 500. An article by the Associated Press describes how it is believed that the volatility of the VIX has become more subdued in comparison to previous sell offs in October and November of 2008.

But my question is, can pattern recognition be applied to the volatility indices as well? If they can, then the rally today may just be another false positive.

The previous volatility run-ups of January and March of 2008 resembled a double top. And after a recovery from those run-ups in volatility, there was a steady but subtle increase in volatility until the run-ups in October and November which also resemble a double top.

Presently we are in another recovery period in the volatility, which is also in a subtle up trend like before. So before anyone gets their hopes up about the direction of the market, I would wait to see if this subtle volatility uptrend deflates into a downtrend.

Personally, I will be looking for more of these "diamond in the rough" stocks but for the general market I will remain bearish. Possibly until late 2009, early 2010.

That is my opinion, you can take it or leave it.

Disclaimer: I am not a stock broker; I am not a financial advisor; I am not recommending to you what to buy or sell. I am just an opinionated investor. If you decide to follow in my footsteps you are taking risk. It is inevitable that I may be wrong. So if you are going to follow in my footsteps that is your own personal decision. I am not responsible for any loss that you may, and probably will, incur regardless of my opinion.